China Pledges $42 Billion To Support Property Sector
China's government has promised to allocate the equivalent of $42 billion U.S. to support the country's ailing property sector.
Officials in Beijing have said that the money will be used to support state-owned enterprises and enable them to buy unsold apartments to help developers finish construction on pre-sold properties.
The People's Bank of China's Deputy Governor Tao Ling said real estate companies can use the funds earned from the sale of apartments to complete construction and help to alleviate pressures in the country's overbuilt property sector.
China's government has made the completion and delivery of pre-sold homes a priority in recent months as it struggles to resolve a crisis in the property sector that is weighing on the economy.
Additionally, the People's Bank of China has removed a floor on mortgage interest rates and lowered the minimum down payment ratio for first- and second-time home buyers.
For years, apartments in China were sold before construction was finished. However, delays in deliveries of completed apartments have increased in recent years as developers ran into financing problems.
Analysts have estimated that there are about 20 million pre-sold, unfinished apartments in China right now.
At the current sales pace, it will take more than two years to clear the existing backlog of new homes. That's nearly twice as long as the historic pace of 12 to 14 months.
U.S. investment bank Goldman Sachs (GS) has calculated that home sales in China declined 8.5% month-over-month in April of this year as the slump in the property sector worsens.
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